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How can you balance the needs of different investors when creating a budget?

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Creating a budget is a crucial task for any business, but it can be challenging when you have to consider the needs and expectations of different investors. Investors may have different goals, risk preferences, time horizons, and return requirements, and they may influence your budget decisions in various ways. How can you balance the needs of different investors when creating a budget? Here are some tips to help you.

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Nitin Lalwani

Venture Capital | Founder | Deloitte | LetsVenture | Startup Mentor

1 Understand your investors

The first step is to understand who your investors are, what they want, and how they communicate. You can use various sources of information, such as financial statements, annual reports, investor relations, feedback surveys, and meetings, to learn more about your investors. You should also segment your investors based on their characteristics, such as size, type, industry, location, and relationship with your business. This will help you tailor your budget to their specific needs and expectations.

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Nitin Lalwani

Venture Capital | Founder | Deloitte | LetsVenture | Startup Mentor
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I would say one should take a step back from this stage. You should be more cautious while selecting your investors and discuss your long terms budget plans before onboarding them so that you are both on the same boat. However, in between the journey of building business you might face a lot of challenges and you might need to alter your budgets accordingly and at that time your investors will only be able to resonate if they would have agreed to your budget in the first place. Your should always stand by your side when it comes to budgeting. To alter company's growth budgets based on what investors goals is not a good idea. It should be more linked to company's future

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2 Align your budget with your strategy

The next step is to align your budget with your business strategy and vision. Your budget should reflect your long-term goals, your competitive advantages, your market opportunities, and your value proposition. Your budget should also show how you plan to use your resources, allocate your costs, generate your revenues, and manage your risks. By aligning your budget with your strategy, you can demonstrate to your investors how you intend to create value for them and achieve sustainable growth.

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3 Communicate your budget clearly

The third step is to communicate your budget clearly and effectively to your investors. You should use simple and consistent language, avoid jargon and technical terms, and provide relevant and accurate data. You should also use visual aids, such as charts, graphs, tables, and dashboards, to illustrate your budget figures and projections. You should also explain the assumptions, methods, and scenarios behind your budget, and how you plan to monitor and adjust it if needed.

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Nitin Lalwani

Venture Capital | Founder | Deloitte | LetsVenture | Startup Mentor
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Communication and transparency is the key for any healthy relationship and it is also relevant for an Investor and portfolio company. MIS and budgets should be properly provided to the investors on a regular basis with charts and other easy to understand graphics. It should also cover all the important metrics which an investor would want to see and know about and how with the current budget allocation one can improve on those metrics.

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4 Address your investors' concerns

The fourth step is to address your investors' concerns and questions about your budget. You should anticipate the potential issues and challenges that your investors may raise, such as cash flow, profitability, debt, liquidity, growth, and risk. You should also prepare contingency plans and alternative scenarios to show how you can cope with uncertainty and volatility. You should also highlight the strengths and opportunities of your budget, and how you can leverage them to create value for your investors.

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Nitin Lalwani

Venture Capital | Founder | Deloitte | LetsVenture | Startup Mentor
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Investors will have concerns only is the company is not growing. First and foremost things to do address all the investors concerns on the budget is to make sure the company grows at a decent growth rate. However, there can be adverse scenarios as well. Then one should be ready with all the market data about the product growth and potential funding that you will seek. There should be a plan ready all the time to cater any contingency and down turn. This is how the investors trust is built and thats how they will trust your budget instinct.

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5 Seek your investors' feedback

The fifth step is to seek your investors' feedback and input on your budget. You should encourage your investors to share their opinions, suggestions, and expectations, and listen to them attentively and respectfully. You should also acknowledge their contributions, and show how you have incorporated them into your budget or why you have not. You should also follow up with your investors regularly, and update them on your budget performance and progress.

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Nitin Lalwani

Venture Capital | Founder | Deloitte | LetsVenture | Startup Mentor
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Sometime taking feedback from a lot of different type of investors can also get you into trouble. Take feedbacks from people aligned to the company's interest and act on it. Take all the recommendations and realign the budget based on the company's needs and circle back to the investors again for the feedback. This is build more trust and will give them a sense of satisfaction that you value their inputs and then will be willing to help in the futures as well

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6 Balance your investors' needs

The final step is to balance your investors' needs and expectations when creating a budget. You should not favor one group of investors over another, or compromise your business integrity or ethics. You should also not sacrifice your long-term goals for short-term gains, or ignore the external factors that may affect your budget. You should aim to create a budget that satisfies your investors' needs and expectations, while also supporting your business strategy and vision.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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How can you balance the needs of different investors when creating a budget?

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1 Understand your investors

2 Align your budget with your strategy

3 Communicate your budget clearly

4 Address your investors' concerns

5 Seek your investors' feedback

6 Balance your investors' needs

7 Here’s what else to consider

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